Friday, January 06, 2012

Russia, Qatar, KSA, and Iran Will Be Forced into GTL Production

Gas to liquids (GTL) is a capital intensive process of converting natural gas to either diesel (FT) or gasoline (MTG). The countries of the world with the largest reserves of conventional natural gas are Russia, Iran, Qatar, Saudi Arabia, and Turkmenistan.

These countries prospered from selling their gas resource to global markets, but something big is happening to change that -- the shale gas revolution! Some of their biggest customers have discovered abundant reserves of shale gas within their own borders. Once these resources are developed, global prices for natural gas are likely to take a nosedive. Conventional gas suppliers will soon have to scramble to convert their formerly valuable natural gas into liquid form, or their economies will be in big, big trouble.

"The global energy chessboard is changing, and markets will be realigned. Countries that have never had so much available energy will become self-sufficient, and perhaps even exporters," Luis Alberto Terrero, head of the Venezuelan Gas Processors Association (AVPG), told IPS.

An EIA study published in April 2011 found practically the same volume (6,620 Tcf) of shale gas deemed recoverable in just 32 countries, and the reserves are differently distributed, with China possessing 1,275 Tcf, the United States 862, Argentina 774, Mexico 681, South Africa 485 and Australia 396 Tcf.

Furthermore, some countries long dependent on foreign suppliers would have a huge resource base compared with their consumption: for example France and Poland, which import 98 and 64 percent, respectively, of the gas they consume, are in possession of shale gas reserves estimated at over 180 Tcf each.

In South America, giant oil producer Venezuela is estimated to have only 11 Tcf of shale gas, barely one-twentieth of its conventional gas reserves, while Brazil and Chile, which currently import about half the gas they consume, possess estimated shale gas deposits of 226 and 64 Tcf, respectively.

Paraguay has an estimated 62 Tcf of shale gas, nearly three times the conventional gas reserves of Bolivia, the top exporter of natural gas in South America. Uruguay, which imports all of its oil and gas as it lacks both, has at least 21 Tcf of shale gas.

"So far this century, this is the biggest innovation in energy, in terms of scale and impact," according to U.S. analyst Daniel Yergin, author of a classic history of the oil industry, "The Prize: The Epic Quest for Oil, Money and Power", who emphasised that one-third of all the gas produced in the United States is already extracted from shale gas reserves. _ipsnews

Environmental groups have pulled out all the stops to try to slow the spread of the shale gas revolution. It would be nice to be able to follow the money to see whose cats' paws these faux environmental goonies have become. But no matter. The economic revolution portended by developments in the shale energy sector will rip through global hydrocarbon markets, and take no prisoners -- faux greens or no faux greens.

And state energy companies such as Russia's Gazprom and Iran's gas infrastructure will all feel the heat from loss of customer demand. When that happens, these conventional gas giants will be forced to scramble for alternative markets in order to balance their budgets and prevent all-out insurrection by their citizens.

Gas to liquids is the logical choice for gas-rich nations who suffer a rapidly declining demand for natural gas. With oil prices staying above $100 for extended periods of time, the potential profits to be made from synthetic diesel and gasoline from methane are quite large.

As noted, GTL is quite capital intensive, requiring investments well into the $billions and tens of $billions. Corrupt, double-dealing nations such as Russia, Venezuela, Iran, and Bolivia may find it difficult to get investors willing to risk that much. Too bad for them.

The potential profits to be made in GTL will tempt even the most jaded and suspicious international investor, however. It will be fascinating to see who decides to commit.

It will also be fascinating to see what floods of GTL diesel and gasoline do to already price-inflated crude oil markets.

5 Comments:

Speaking of Daniel Yergin here's a video of him talking about the future of energy and such. Its also amazing how the comments rip into him without mercy. I guess he doesen't fit into their doomer world view